If you enjoy creating yummy dishes for your family and friends and have made the difficult, yet exciting, decision to open a restaurant, you must understand the kind of insurance you need. It is easy to enjoy being a business owner, watching your customers eat your food, see the cash register open and close, and hear the praise from your family and friends. That high feeling can come crashing down pretty quickly should there be a slip and fall, food poisoning, or any other unforeseen incident that results in a lawsuit. Whether you have a restaurant, catering business, ice cream shop, or food truck you should have Restaurant insurance. And depending on the type of food service you are in, the insurance policies you need my vary.
Restaurants come with huge risks. The food service industry is in its own category when it comes to the number of risks it faces. Not only do you have to worry about the same things as other businesses, like patrons getting injured on the premises, but also the damages that can come with food. At the very least, the following insurance policies will help protect your business when bundled together.
General Liability - Bodily injury and property damage are the most prevalent kind of claims associated with any business. A customer could have a slip and fall, get food poisoning, or cut themselves with a knife. These are just a few examples of things that can happen inside your restaurant that can result in a lawsuit, would you be able to pay for these out of pocket? Additionally, the policy will pay for defense costs, which can often add up to be more than the incident that caused the claim.
Commercial Property - If you own the building outright that your restaurant operates out of you will want Commercial Property insurance. Additionally, you will want coverage for the business's personal property inside like tables, chairs, and cooking utensils. If you have any special cooking equipment you can also cover that under the business property.
Business Interruption - Speaking of a Property insurance claim, often with restaurants this is a result of a fire. If your restaurant has to deal with this tragedy, you may have to close for a period of time, which means no income. The downside is that your vendors, mortgage company, or employees will till expect to get paid. Business interruption coverage can pay for your lost income until you get back up and running. This is a great coverage to have if you have excellent employees that you don’t want to risk losing if you do have to close for a period of time.
Food Contamination - Even though you have procedures and policies in place to prevent any kind of food contamination, mistakes can happen. An employee can transfer an illness, or maybe the chef left the chicken out too long to thaw. Either way, you need to be able to replace all of the food you will have to throw away. This can make or break a restaurant so having Food Contamination insurance can prevent you from having to dip into your profits.
Workers Compensation - Your state most likely requires that you carry Workers Compensation coverage if you have employees. If it doesn't, it is still a good idea. Also known as Work Comp, this coverage is for lost wages and medical bills should an employee become injured on the job or fall ill. Often it also includes some extra amounts for accidental death and funeral expenses, if God forbid, something tragic should happen.
Commercial Auto Using vehicles for your business might be something you do on a daily basis and don't even think about. If so, your Personal Auto insurance policy is not going to cover any claims that happen as they exclude business operations. A Commercial Auto insurance policy will also provide coverage for your business if an employee is using their car for work purposes. Hired and non-owned auto liability provides coverage for the liability your business could face if your employee, or a rental car you hire, is at fault in an accident. Keep in mind this is only for liability for your business, not liability or physical damage for the employee's car. You should consider this coverage if you have employees make deliveries or even run to the bank to make a deposit.
Key Person Life - Do you have a succession plan in place? What will happen if you die? What about if your head chef dies? You should have Key Person Life insurance on anyone who is key to your business. This will allow your business to keep running by using those funds to hire someone else and get them trained quickly.
Umbrella or Excess Liability - There is no easy way to determine how much liability coverage you will need. However, because of the risk that restaurants, or anyone in the food service industry, face it is a good idea to also have an Umbrella Liability policy. This can also be called Excess Liability. How it works is once the underlying policy limit is exhausted, this policy would provide an extra limit to get coverage from, usually anywhere from $1,000,000 to $5,000,000 depending on needs. The underlying policies can include General Liability, Auto Liability, Employers’ Liability, etc.
A few other insurance policies to consider as a restaurant owner depending on your operations include Liquor Liability, Cyber Liability, and Employment Practices Liability insurance.
Even though all of the insurances mentioned above are essential to running and maintaining a successful restaurant, they are not all required. When you own and operate a restaurant in the United States there are certain requirements when it comes to insurance coverage, so at the very least you should have:
Keep in mind that just because the government requires just the top three insurance policies depending on your business operations, only having these policies can cause some huge gaps in coverage. Just because you have Workers Compensation coverage to cover your employee’s lost wages, does not mean you will have coverage if they sue you for unpaid wages. This type of claim would fall under Employment Practices liability. It is imperative to understand the type of risk your business has and how to best transfer that risk to the right insurance policies. Bundling a bunch of policies together and creating a package is a great way to start the process.
The cost of insurance for a Restaurant can vary greatly depending on many factors. Things to consider are the size of your business, the number of employees you have, the type of food and/or drinks you serve, past claims history, and how long you have been in business. One way to save money on insurance for your restaurant includes bundling what you can, such as General Liability and Commercial Property into a BOP, or Businessowners Policy. Also, it is a great idea to work with an experienced insurance agent that specializes in insurance for Restaurants because they will understand your risk and be able to recommend the best coverage for you. Trying to do it on your own can be overwhelming, and you may end up with more than you need or not enough.
If you are still on the fence about which insurance policies you need for your restaurant, it is a good idea to discuss your business and needs with a licensed insurance agent. Coverwallet has an amazing team that specializes in business insurance and can work through what you need, and let you know what suggestions they have to make sure you have the best coverage. Your business means the world to you, so give us a call today so we can help keep it going for you.